Standard Bank Mozambique PMI: Business activity and new orders rise, but inventories fall

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Standard Bank Mozambique PMI: Business activity and new orders rise, but inventories fall

11:02 CAT | 04 Jun 2025

FILE - For illustration purposes only. [File photo: O dia a dia de um moçambicano /Screen grab]

Key findings

PMI drops below 50.0 mark as firms deplete stocks

Output and new orders grow at softer rates

Total input costs decrease slightly

The Standard Bank Mozambique PMI® signalled an easing of momentum in the private sector during May, as operating conditions declined for the first time in four months. Output and new orders increased further, but growth rates lessened, leading firms to cut purchases and stocks. Employment was broadly steady, whilst the outlook for future activity remained strongly positive.

Reduced spending and lower supply-chain constraints helped total input costs to fall in May. Selling prices ticked higher, but the pace of inflation was mild.

The headline figure derived from the survey is the Purchasing Managers’ IndexTM (PMI). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show a deterioration.

The Mozambique PMI dropped below the 50.0 no-change mark in May, falling to 49.6 from 50.5 in April, to indicate a slight deterioration in business conditions. Stocks of purchases, employment and suppliers’ delivery times all had a negative impact on the headline index.

The two largest components of the PMI, output and new orders, remained in positive territory in May. That said, rates of growth eased in both cases and were the softest recorded in four months. While a number of survey participants reported greater customer numbers and larger orders, others noted fewer requests and reduced supply levels. Firms tended to signal that weaker sales growth had weighed on output.

With demand conditions plateauing, Mozambican firms opted to reduce their purchases of inputs and goods for resale during May, with the latest survey indicating the first contraction in 2025 so far. This in turn led to a renewed drop in the amount of purchased goods held in stock. That said, rates of decline were modest in both cases.

Lower purchases helped to ease pressure on suppliers, leading to a greater improvement in delivery times. The latest reduction in overall lead times was solid and the most marked for seven months.

Employment was broadly steady in May, following a slight increase in April, as the vast majority of surveyed businesses made no change to their workforces. At the same time, firms reported a renewed drop in outstanding work, with comments suggesting that a slowing of demand growth had increased their ability to complete new orders on time.

May survey data meanwhile indicated a fresh reduction in average input prices across the Mozambican private sector. The decrease followed three successive months of rising prices, although the pace of decline was mild.

Companies mainly related lower input prices to a reduction in buying activity which subsequently led to a decrease in purchase costs. Staff cost inflation was subdued, despite ticking up to its highest for eight months.

Average prices charged by Mozambican firms rose during May, following no change in April. That said, with costs falling, the overall markup in charges was only marginal.

Looking ahead to the next 12 months, Mozambican companies were broadly optimistic of an increase in output. Around 38% of respondents projected growth, though this was slightly lower than in April. Businesses with a positive outlook often based expectations on increasing sales, new development and market growth

Comment

Fáusio Mussá, Chief Economist – Mozambique at Standard Bank commented:

“The Standard Bank Mozambique PMI fell to 49.6 (seasonally adjusted) in May, from 50.5 in April. It has been volatile since the last quarter of 2024.

“While PMI prints below the 50-benchmark suggest monthon-month contraction in private sector economic activity, increased PMI volatility may signal a lack of growth momentum in the economy recovery from post-2024 general election fallout.

“PMI data shows month-on-month (m/m) expansions at a softer pace in output and new orders, and contractions in purchases and stocks, with no growth in employment, all leading to a decline in input costs.

“The PMI future business expectations sub-index, a measure of business sentiment, decelerated in May, suggesting a softer level of optimism around growth expectations for the next 12 months.

“We see ongoing fiscal and foreign exchange (FX) liquidity pressures limiting GDP growth to 3% y/y this year and 3.1% y/y in 2026, which is not much higher than populational growth. This also translates our expectations of declining external support and limited positive spill-over effects from the liquified natural gas (LNG) projects during the construction phase, which denotes limited linkages with the local economy.

“Despite interest rates declining since the beginning of 2024, and the government and banking sector making available this year some funds to support the post-election recovery, credit growth remains low, denoting subdued investment. Credit growth eased to 4.3% y/y in March, from 4.4% y/y in February”.

Source: Standard Bank Mozambique PMI